Bonds & rates
Capital structure
The ranking of everyone who funded a company, deciding who gets paid first if it fails.
How it works
The order runs roughly: secured lenders, senior unsecured bondholders, subordinated debt, preferred shares, then common shareholders last.
Position in the structure determines both the risk taken and the return expected. It is the single most important fact about any security a company issues.
Related terms
- EquityA share of ownership in a company, giving you a claim on what is left after everyone else is paid.
- Preferred stockShares that rank ahead of common stock for dividends, usually without voting rights.
- Recovery rateHow much of a defaulted bond’s face value holders eventually get back.
- DefaultA borrower failing to make a payment, or breaching a term of the debt agreement.
- WACCThe blended cost of a company’s debt and equity funding, weighted by how much of each it uses.
Mentioned in
More in Bonds & rates
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.